Managing bullying risk

Christopher Niesche

Small businesses need to ensure they're stopping staff bullying other workers because tough new laws have increased penalties and made it easier for victims to sue them.

"There's increased exposure on the poor old SME," says Tony Sykes, a director of General Insurance Brokers of Australia. "It also demonstrates that there is a duty of care of the employers towards their employees."

When an unresolved workplace conflict occurs, there is a higher chance of employees developing psychological problems at work. Photo: Louie Douvis

Under changes to the Fair Work Act which came into effect on January 1, workers who believe they are being bullied at work can apply to the Fair Work Commission for an order to stop the bullying.

Failure to comply with a commission order can result in penalties of up to $10,200 for individuals and $51,000 for corporations.

But there are also other risks. Victims can also make a claim for psychological injury as part of a workers compensation case.

Staff matters, including bullying, are usually covered by management liability policies, which can help with legal costs, and any eventual payouts and fines.

Advertisement

Sykes says it's hard to assess the impact of the new laws yet, but management liability premiums haven't yet risen because of the new laws (although he notes that premiums have been rising because of an increase in theft by employees).

Any bullying claim can be hugely costly and distracting for any small business owner. Sykes recently dealt with a small IT company where two key staff members left after a bullying incident, leaving the owner to restructure the business and re-establish relationships with clients.

Claims under employment practices liability have been rising steeply in recent years, says Andrew Faber, manager of MGA Insurance Brokers, with one insurer reporting a that 42 per cent of all management liability claims stem from employment practice liability. "You've got a workforce that is more aware of their rights to take action against the employer if they feel as though they're getting bullied at the workplace, and rightly so," he says.

And some insurers are pushing up the excesses on management liability insurance, so even if an SME does have insurance, it can still end up $5000 or $10,000 out of pocket as the result of a claim.

Faber says the law changes have given the Fair Work Commission powers to force businesses to make changes, either in their training, grievance procedures, or even the business structure itself. "It very much beefs up their ability to be able to come in there and modify the way you run your business," he says.

Businesses need to have an effective risk management process in place to ensure that any workplace incidents don't escalate to bullying claims.

Firstly, they need a documented employee manual for all staff that outlines what constitutes bullying, what is and what isn't acceptable in the workplace, and make sure that that information is part of the induction process for all new employees. Staff also need to be told what they can do if they feel they are being unfairly treated and managers should have an open door policy so staff feel they can raise and resolve these issues.

Obviously small businesses don't have the resources or expertise to write their own anti-bullying manual, but there are some standardised manuals available online, from industry associations or specialist employment firms.

It's better if workers feel they can approach management about an issue rather than making an outside regulator or advisor the first port of call.

"Quite often it can just be a misunderstanding between two employees – someone thinks they're just having a joke but the other person takes it seriously," says Faber, "and you might be able to knock it on the head straight away.

"Where we see a lot of claims come from is where something has come up and it hasn't been taken seriously in the first place, and it's just been let go and things fester and it becomes a much bigger issue."

Claims can also sap morale, and sometimes once one staff member makes a formal complaint, other staff can follow suit.

Broker Chris Webber, of Webber Insurance, says all accusations of bullying should be investigated and any outcomes followed up on to ensure that those kinds of incidents are less likely to recur.

He says the major expense in bullying cases is the legal fees – these can run to the hundreds of thousands of dollars, regardless of the merits of the claim – so businesses need to make sure they're covered as part of their management liability insurance.